What Does Statutory Accounting Principles Mean?

The term refers to a group of authoritative accounting rules, regulations and principles laid down by the National Association of Insurance Commissioners in order to facilitate for insurance companies to prepare their periodic financial statements.

Statutory Accounting Principles Explained

Registries that are based on Statutory Accounting Principles (or in short, SAP) are subject to official regulatory bodies of each individual state.

One should know that SAP is generally considered more severe and regulatory than the more popular GAAP method which also refers to the preparation of the financial statements. Talking about GAAP one should think of a group of accounting standards and principles which are applied to different companies in order for investors to have more comparability among the various companies. This comparability may be a consequence of the more consistent financial statements and reports. This is because among other tools, investors use analyses of the companies’ financial statements in order to predict an investment’s profitability.

GAAP prescribes among other issues how revenues could be recognized, or what is the adequate classification of the items from the balance sheet.